Universal service: A policy for social or corporate welfare?

[Commentary] Universal Service policies exist in most telecommunications markets around the world. But the devil is in the details of the exact arrangements under which the policies are enacted. In Australia, the Department of Communications is currently undertaking a review of the country’s universal service arrangements. In response to the review, Vodafone Australia has proposed that the universal service obligation be funded by a tax on industry participant profits, rather than a tax on connections as is most commonly observed in other countries (including the US).

Vodafone’s proposal is deeply flawed as it confuses the policy objective of increasing competition in telecommunications markets with the universal service policy objective of securing a baseline level of communications services at reasonable prices for all consumers.

[Bronwyn Howell is general manager for the New Zealand Institute for the Study of Competition and Regulation]